When paying your tax debt would result in being unable to meet your necessary living expenses, the IRS will place you in Currently Not Collectible status. In order for you to be placed in Currently Not Collectible status you must fill out a financial statement and submit it to the IRS. The IRS will review your financial statement to determine if you qualify for Currently Not Collectible status. Many expenses that you consider necessary may be greater than the national standard amounts that the IRS allows or may be considered unnecessary by the IRS and disallowed.
The IRS may not take any collection action against you after you have been marked Currently Not Collectible. Interest and penalties will accrue on the unpaid liability and you will continue to receive annual statements reminding you of your tax liability. The IRS may also periodically review your financial information to determine if your financial position has changed and you are now able to begin making payments.